The last time auto loan delinquency rates were this high was ten years ago, just as the US economy was spiraling downward into the Great Recession.
Seven million Americans are at risk of getting their cars repossessed. According to new data from Equifax and the Federal Reserve Bank of New York, the percentage of US auto loans more than 90 days delinquent climbed to 4.5 percent in the last quarter of 2018.
The last time Americans fell this far behind in making their car payments was in the second quarter of 2009, when the United States was plunging into the worst economic crisis since the Great Depression.
Is America’s addiction to automobiles setting us up for another financial collapse?
It seems unlikely. According to these data, auto loans represent less than 10 percent of total consumer debt in the United States. The home mortgages that brought down the economy in 2009, by comparison, make up more than two-thirds.
Fortunately, for now delinquency rates in the housing market are at 1 percent and falling. And while credit card delinquency deserves only a watchful eye, there is one other form of consumer debt that raises as many alarms as car loans: The rate of delinquency in student debt markets.
Could these trends of escalating student- and auto-loan delinquency be related? The data can’t say for certain. But they do tell us that the age cohort carrying the largest proportion of student debt, young adults age 18-29, is also the one that leads in credit delinquency.
What risks dose it pose to our economy and our society to have portions of an entire generation saddled with consumer debt and bad credit?
